Winston Hotels, Inc. (NYSE:WXH), a real estate investment trust (REIT) and owner of premium limited-service, upscale extended-stay and full-service hotels, today announced results for the second quarter and six months ended June 30, 2003.
Net income applicable to common shareholders was $1.7 million for the three months ended June 30, 2003, or $0.08 per share, compared to a net loss applicable to common shareholders of ($12.8) million for the three months ended June 30, 2002, or ($0.64) per share. This difference is primarily due to the acquisition of the leasehold interests for 47 hotels in 2002 from Interstate Hotels & Resorts, Inc., formerly MeriStar Hotels & Resorts, Inc., the cost of which was expensed in the second quarter of 2002. Funds from operations (FFO) declined 14.1 percent to $6.9 million for the second quarter of 2003, compared to $8.0 million for the like period a year earlier. FFO per share decreased 13.5 percent to $0.32 for the 2003 second quarter on 21.4 million fully diluted weighted average shares outstanding, compared to FFO per share of $0.37 on 21.4 million fully diluted weighted average shares outstanding for the 2002 second quarter. Results were in line with the company`s previously announced revised guidance.
The effects of the war with Iraq, a decline in gross operating profit margins and a continued sluggish economy were key factors in the lower 2003 second quarter results. “For the quarter, occupancy declined 1.9 percent from the second quarter 2002, and average daily room rate decreased 3.0 percent for the second quarter of 2003 as compared to the same period in 2002, resulting in a 4.7 percent downturn in RevPAR as compared to the second quarter of 2002. This placed continued pressure on gross operating profit margins, which declined from 45.1 percent in the second quarter of 2002 to 43.6 percent in the second quarter of 2003,” said Bob Winston, chief executive officer.
Consolidation of Management Contracts: On July 1, 2003, Winston transferred 41 of its management contracts in three separate transactions to Alliance Hospitality Management, LLC, a newly created hotel management company that is owned by an affiliate of Atlanta-based Noble Investment Group, Ltd., a nationally recognized hospitality company, and hotel veteran Dale M. Turner, CHA.
— Thirty-three management contracts were transferred from Interstate. Winston had acquired leasehold interests for 47 of its hotels from Interstate`s predecessor company, MeriStar, on
July 1, 2002. — Six hotels were transferred from Interstate Management and Investment Corp., a privately held hotel investment and management company based in Columbia, S.C. — Two hotels leased by a subsidiary of InterContinental Hotels
Group PLC were transferred: the Las Vegas, Nev., Hampton Inn to Winston`s wholly owned taxable REIT subsidiary and the
Windsor, Conn., Hilton Garden Inn to a lessee owned 57.65 percent by Winston`s wholly owned taxable REIT subsidiary, and 42.35 percent by Regent Partners, Winston`s equity partner in
the project. Concurrently, the two properties` management
contracts were assigned to Alliance, which now operates
approximately 84 percent of the hotels in which Winston has an
“We have much more closely aligned our ownership interests with management,” Winston said. “We are fortunate that most of the people who have been operating these hotels at the property level remained with Alliance, making the transfer essentially seamless to our guests.
Winston noted that the company continues to have an active acquisition pipeline and hopes to continue purchasing hotels through its joint venture with Charlesbank Capital. “Also, we continue to examine our existing portfolio and will selectively prune when appropriate.”
Due to the acquisition of the company`s leasehold interests from Interstate Hotels & Resorts on July 1, 2002, the results of operations for the three and six months ended June 30, 2003, compared to the results of operations for the same periods a year earlier, do not offer a meaningful comparison. This is due primarily to recording the operating results of the hotels, for which the leasehold interests were acquired, on the company`s statements of operations beginning in the third quarter of 2002.
In an effort to make a more meaningful comparison between periods, the company has provided below selected pro forma financial information for the three and six months ended June 30, 2003 and 2002, as if the acquisition of the leasehold interests from Interstate occurred on January 1, 2002. This information is shown for the 47 hotels that were open during the periods presented and does not include operating results for any hotels that have been sold.
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